Skip to content
SuperMoney logo
SuperMoney logo

What Is a Share Certificate? Explanation, Types, and Examples

Last updated 03/15/2024 by

Alessandra Nicole

Edited by

Fact checked by

Share certificates, also known as stock certificates, are legal documents issued by companies to shareholders. They serve as proof of ownership and include essential information such as the certificate number, company details, shareholder’s name, and the number of shares owned. In today’s digital age, physical share certificates are rare, with electronic records being the norm. However, understanding their significance and handling lost certificates is vital for shareholders. This article explores share certificates, their advantages, disadvantages, and answers common questions, making it a valuable resource for anyone in the world of finance.

Compare Business Loans

Compare rates, terms, and community reviews between multiple lenders.
Compare Business Loans

What is a share certificate?

A share certificate, also referred to as a stock certificate, is a legally binding document issued by a corporation. Its primary purpose is to serve as irrefutable proof of an individual’s ownership of a specific number of shares in that corporation. While these certificates were once widespread, they have become increasingly rare in today’s digital financial landscape.

Understanding share certificates

When a company sells shares in the market, it provides shareholders with a share certificate. This document functions as both a proof of purchase and ownership. It certifies that the shareholder is the registered owner of a specific number of shares, beginning from a particular date.
Key information found on a share certificate includes:
  • Certificate number
  • Company name and registration number
  • Shareholder name and address
  • Number of shares owned
  • Class of shares
  • Issue date of shares
  • Amount paid (or treated as paid) for the shares
In the UK, the Companies Act 2006 requires companies to issue share certificates within two months of issuing or transferring shares. Companies may issue a single certificate for multiple shares issued or transferred at the same time, unless shareholders request separate certificates.
Share certificates can be issued in either registered or bearer form. A registered share certificate serves as evidence of title ownership, while a bearer share certificate, though less common today, grants the holder all legal rights associated with the stock.
Fun fact: The Dutch East India Company issued the first stock certificate in 1606, worth 150 Dutch Guilder.

Special considerations

In today’s modern financial markets, individual investors rarely take physical possession of their share certificates. Some countries, such as Sweden, have entirely eliminated the issuance of share certificates as proof of ownership, opting for electronic registration instead.
In the United States, the Central Securities Depository (CSD) is responsible for electronically holding shares in either certificated or uncertificated (dematerialized) form. This allows easy ownership transfer through book entries instead of physical certificates.
Share certificates can be of registered or bearer form. A registered share certificate serves as evidence of title ownership, while a bearer share certificate, although less common today, entitles the holder to exercise all legal rights associated with the stock.
Many share certificates, especially older and rarer ones, have become highly collectible for their historical significance and the intricate design of the documents. This practice, known as “scripophily,” involves collecting and studying share certificates and similar financial documents, with their value dependent on age and condition, much like stamp or banknote collecting.
Weigh the Risks and Benefits
Here is a list of the benefits and drawbacks to consider.
  • Share certificates provide irrefutable proof of ownership.
  • They can be valuable collectibles, especially older and rarer specimens.
  • For some companies, they are still the preferred method of share ownership.
  • Issuing paper stock certificates is time-consuming and costly for companies.
  • Maintaining a stock certificate system involves significant administrative work.
  • Ownership can be challenging to track, as shareholders can transfer certificates without informing the company.

Frequently asked questions

What are my old share certificates worth?

Never dispose of your old share certificates without considering their potential value. To determine their worth, follow these steps:
  1. Contact your stockbroker to find the share certificate’s CUSIP number.
  2. Check if the company is still publicly traded.
  3. Contact the share certificate’s transfer agent (the agent’s details should be on the certificate).
  4. Consider using a paid service to research your stock’s history.

What do I do if I lost my original share certificate?

If your share certificate is lost, accidentally destroyed, or stolen, you still maintain your rightful ownership of the stock and its associated rights. Here’s what you should do:
  1. Contact the transfer agent immediately and request a “stop transfer” to prevent the stock certificate from being transferred to another person.
  2. Consider involving your stockbroker in this process.
  3. Prepare an affidavit detailing the circumstances surrounding the loss.
  4. Purchase an indemnity bond to safeguard the company against potential future claims related to the lost certificate.
  5. Request a new certificate before it’s needed by an innocent purchaser.

If stock certificates are transferred on death, what is the tax?

Whether transferring a stock certificate on death or electronic shares, the tax implications remain the same. Inheritance of shares upon someone’s death is not subject to taxes, but if you choose to sell the inherited shares, you may become liable for taxes.

SuperMoney may receive compensation from some or all of the companies featured, and the order of results are influenced by advertising bids, with exception for mortgage and home lending related products. Learn more

Loading results ...

You might also like